How Warren Buffett is lying to you
Exposing 2 of his biggest lies
Warren Buffett needs no further introduction. He is the probably the first name that comes to mind when we think of investing.
Some may look up to him, others may find his methods old-fashioned.
What we do know is that he has publicly expressed his hate for crypto. He has also labelled derivatives “financial weapons of mass destruction”.
What we perhaps may not know is that he is vested in these asset classes.
On Derivatives (i.e. Options)
In Berkshire Hathaway’s 2002 annual report, Buffett called derivatives “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
This was in response to the derivatives instruments that triggered the implosion of Archegos Capital Management.
In his 2002 Berkshire Hathaway’s letter, Warren Buffett :
I view derivatives as time bombs, both for the parties that deal in them and the economic system.
In Apr 1993, Buffett sold 50,000 put options (equivalent of 5 million shares) for $1.50 worth of premiums per option.
In so doing, he collected a cool $7.5 million worth of option premiums of upfront, which he then uses to invest.
The concept of selling options is similar to underwriting insurance. Collect premiums upfront, and use that float to invest.
When used correctly, options can be a good tool to complement your investing.
On Crypto (i.e. Bitcoin)
Warren Buffett and his partner-in-crime Charlie Munger have been bashing Bitcoin.
Guess what?
While he was slamming Bitcoin, he was selling his bank and credit card stocks.
Now that he has this huge cash pile, what did he use it for?
He used it to buy Nubank, which then buys Bitcoin with its reserves. Through its stake in Nubank, Buffett is invested in Bitcoin.
What’s more- Nubank launched its own cryptocurrency in Brazil. Does that sound like the fallen giant FTX, creating its own token FTT?
Do what they do, not what they say
Mainstream media feeds us with news everyday.
When we read a piece of news online, we tend to believe that it’s the truth. This is why many people act on what they read online, and get burned.
It could be an influencer who recommended a certain stock, or a celebrity who endorsed a crypto exchange.
The key learning is not to just listen to what they say, but observe what they do. After all, actions speak louder than words.